Wednesday, July 22, 2009

William Greider, "Dismantling the Temple" (Excerpt)

"Dismantling the Temple"

by William Greider

"The financial crisis has propelled the Federal Reserve into an excruciating political dilemma. The Fed is at the zenith of its influence, using its extraordinary powers to rescue the economy. Yet the extreme irregularity of its behavior is producing a legitimacy crisis for the central bank. The remote technocrats at the Fed who decide money and credit policy for the nation are deliberately opaque and little understood by most Americans. For the first time in generations, they are now threatened with popular rebellion.

During the past year, the Fed has flooded the streets with money--distributing trillions of dollars to banks, financial markets and commercial interests--in an attempt to revive the credit system and get the economy growing again. As a result, the awesome authority of this cloistered institution is visible to many ordinary Americans for the first time. People and politicians are shocked and confused, and also angered, by what they see. They are beginning to ask some hard questions for which Federal Reserve governors do not have satisfactory answers.

Where did the central bank get all the money it is handing out? Basically, the Fed printed it, out of thin air. That is what central banks do. Who told the Fed governors they could do this? Nobody, really--not Congress or the president. The Federal Reserve Board, alone among government agencies, does not submit its budgets to Congress for authorization and appropriation. It raises its own money, sets its own priorities.

Representative Wright Patman, the Texas populist who was a scourge of central bankers, once described the Federal Reserve as "a pretty queer duck." Congress created the Fed in 1913 with the presumption that it would be "independent" from the rest of government, aloof from regular politics and deliberately shielded from the hot breath of voters or the grasping appetites of private interests--with one powerful exception: the bankers.

The Fed was designed as a unique hybrid in which government would share its powers with the private banking industry. Bankers collaborate closely on Fed policy. Banks are the "shareholders" who ostensibly own the twelve regional Federal Reserve banks. Bankers sit on the boards of directors, proposing interest-rate changes for Fed governors in Washington to decide. Bankers also have a special advisory council that meets privately with governors to critique monetary policy and management of the economy. Sometimes, the Fed pretends to be a private organization. Other times, it admits to being part of the government.

The antiquated quality of this institution is reflected in the map of the Fed's twelve regional banks. Five of them are located in the Midwest (better known today as the industrial Rust Belt). Missouri has two Federal Reserve banks (St. Louis and Kansas City), while the entire West Coast has only one (located in San Francisco, not Los Angeles or Seattle). Virginia has one; Florida does not. Among its functions, the Federal Reserve directly regulates the largest banks, but it also looks out for their well-being--providing regular liquidity loans for those caught short and bailing out endangered banks it deems "too big to fail." Critics look askance at these peculiar arrangements and see "conspiracy." But it's not really secret. This duck was created by an act of Congress. The Fed's favoritism toward bankers is embedded in its DNA.

This awkward reality explains the dilemma facing the Fed. It cannot stand too much visibility, nor can it easily explain or justify its peculiar status. The Federal Reserve is the black hole of our democracy--the crucial contradiction that keeps the people and their representatives from having any voice in these most important public policies. That's why the central bankers have always operated in secrecy, avoiding public controversy and inevitable accusations of special deal-making. The current crisis has blown the central bank's cover. Many in Congress are alarmed, demanding greater transparency. More than 250 House members are seeking an independent audit of Fed accounts. House Speaker Nancy Pelosi observed that the Fed seems to be poaching on Congressional functions--handing out public money without the bother of public decision-making.

"Many of us were...if not surprised, taken aback, when the Fed had $80 billion to invest in AIG just out of the blue," Pelosi said. "All of a sudden, we wake up one morning and AIG was receiving $80 billion from the Fed. So of course we're saying, Where is this money coming from? 'Oh, we have it. And not only that, we have more.'" So who needs Congress? Pelosi sounded guileless, but she knows very well where the Fed gets its money. She was slyly tweaking the central bankers on their vulnerability.

Fed chair Ben Bernanke responded with the usual aloofness. An audit, he insisted, would amount to "a takeover of monetary policy by the Congress." He did not appear to recognize how arrogant that sounded. Congress created the Fed, but it must not look too deeply into the Fed's private business. The mystique intimidates many politicians. The Fed's power depends crucially upon the people not knowing exactly what it does...."

No comments:

Post a Comment

A Revolutionary Act...

Ad-Free Blog, Forever

"Running"

This blog takes a lot of time and effort. Please help keep this site online. I've done all I could for almost 11 years; if it made a difference in even one life it was all worth it... and, as always, thanks for stopping by! - CP. Questions/comments to CoyotePrime@gmail.com

Thanks for your support!

Why is this blog here?

"Many people need desperately to receive this message: 'I feel and think much as you do, care about many of the things you care about, although most people do not care about them. You are not alone."

- Kurt Vonnegut

"Let me tell you why you're here. You're here because you know something. What you know you can't explain, but you feel it. You've felt it your entire life, that there's something wrong with the world. You don't know what it is, but it's there, like a splinter in your mind, driving you mad. It is this feeling that has brought you to me. Do you know what I'm talking about?"

But remember: "I didn't say it would be easy. I just said it would be the truth." - Morpheus

Search This Blog

Who We're Not

Who you are: the 5%

“Five percent of the people think; ten percent of the people think they think; and the other eighty-five percent would rather die than think.” - Thomas Edison

This blog's not for everyone. That you're here says something great about you! Thanks for stopping by!

Fellow Travelers

Unique Visitors: 2,905,164

Posts Since 8/14/2008: 53,307

Total Pageviews 7,746,288

Follow by Email

Who am I?

Who am I? Ethnically I'm a Choctaw "Native American"/Euro mongrel, currently living midway between Tucson and Phoenix in the desert of Arizonastan. This blog is the result of my daily scavenging for nuggets of truth and soul nourishment wherever they might be found. Here you'll find the very best version of "truth" I can find about the economy and politics, as well as science, human nature and the human experience, literature, music, random observations, comments, poetry, rants, satire and other discoveries from the road to NowHere. Welcome! I'm glad you're here!

How It Really Is

Truth Is Treason

Government truth? LOL

May God Have Mercy...

The Great Seal

Native Pride

The Truth

Truth

Truth

“If any man is able to show me and prove to me that I do not think or act right, I will gladly change, for I seek the truth, by which no man was ever injured. It is only persistence in self delusion and ignorance that does harm.” - Marcus Aurelius

Say What You Mean, Mean What You Say

Facts, Not Opinions

Sheeple, meh...

Second Life

Life's Not Fair...

Stupidity Free Zone

Warning!

The Difference...

Prosecute!

None of this stuff!

Troll Free Zone

Top 100 Blogs

The Daily Reviewer

Fair Use Disclaimer, US Copyright Law

Copyright Disclaimer Under Section 107 of the Copyright Act 1976, allowance is made for "fair use" for purposes such as criticism, comment, news reporting, teaching, scholarship, and research. Fair use is a use permitted by copyright statute that might otherwise be infringing. Non-profit, educational or personal use tips the balance in favor of fair use."This site provides political commentary, education and parody protected by the fair use and My Lai/Zapruder exceptions to copyright law.This blog may contain copyrighted material, the use of which has not always been specifically authorized by the copyright owner. All posts are clearly attributed by name and active link to the original author and website. I am making such material available on a non-profit basis for educational, research and discussion purposes in my efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. Articles are reproduced in accordance with Section 107 of title 17 of the Copyright Law of the United States relating to fair-use and are for the purposes of criticism, comment, news reporting, teaching, scholarship, and research.I believe this constitutes a 'fair use' of any such copyrighted material as provided for in US Copyright Law, Title 17 U.S.C. Section 107. Consistent with this notice you are welcome to make 'fair use' of anything you find on this web site. However, if you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.More information at http://www.law.cornell.edu/uscode/17/107.shtml.

Contact CoyotePrime-at-gmail.com with complaints, comments.

Red Pill, Blue Pill

"You take the blue pill, the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill, you stay in Wonderland, and I show you how deep the rabbit hole goes." - Morpheus